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The Rolls-Royce of Private Partnerships

A new building in Virginia symbolizes a radical shift in economic development.

July 2013

Situated 25 miles south of Richmond, along Virginia’s old “Tobacco Road,” is the Commonwealth Center for Advanced Manufacturing (CCAM). The building it is housed in was meant to be “iconic but cheap,” an industrial-style structure designed to house the guts of a major manufacturing research center.

The building didn’t turn out to be so cheap -- $13 million for 62,000 square feet -- but it certainly is iconic. Designed by the architectural firm Perkins+Will, it has a sleek, silver look that stands in stark contrast to the Virginia woods surrounding it. In the long run, however, it may be more of a landmark to a new and sophisticated approach to economic development.

CCAM is a partnership between three Virginia schools (Virginia State University, Virginia Tech and the University of Virginia) and a dozen or so companies involved in manufacturing, most importantly Rolls-Royce, the jet engine company that has a plant nearby. The reason CCAM exists is because Virginia created it in order to lure Rolls-Royce. But if all goes well, CCAM will be there long after the jet engine giant is gone.

When it began in 2006, the competition for Rolls-Royce, which was mostly among Southern states, had all the earmarks of a classic economic development hunt. When it was over, Virginia’s victory seemed, on the surface, to be typical: In exchange for locating at least one and perhaps as many as three manufacturing plants outside of Richmond, Rolls-Royce received $58 million in incentives from the state and 1,000 acres of land, which was donated by Prince George County.

But the similarity with the typical economic development deal ends there. Most of the incentive money didn’t go to Rolls-Royce. Rather, it went to the founding universities to increase the capacity of their engineering schools to conduct manufacturing research and produce engineers. And Rolls-Royce, along with other companies, is kicking in $400,000 a year to fund CCAM’s research. “We’re lucky to have Rolls-Royce as a partner,” says Barry Johnson, senior associate dean at the University of Virginia’s School of Engineering and Applied Science and the university’s point person on the project. “Another company would not have done it this way.”

Why Rolls-Royce would buy into this approach -- and how Virginia worked collaboratively to make it happen -- is a great story about the direction economic development is headed. It illustrates that it’s better to build assets than give money to companies.

The story goes like this: Rolls-Royce needed access to Eastern ports, airplane manufacturing plants in the South and a ready supply of mechanical engineers -- all of which Virginia had. The company also wanted help with certain types of research. In an unprecedented collaboration, the universities sat down with Rolls-Royce to identify areas where the company needed research and where the universities could provide it. They came up with two: improved coatings (known as surface engineering) and manufacturing systems.

But Rolls-Royce knew that it alone could not fund the necessary research. And Virginia’s economic development folks understood that they couldn’t rely just on Rolls-Royce. So together they began recruiting other companies to help support CCAM, companies that needed the same manufacturing research but weren’t Rolls-Royce’s competitors.

The first two they went after already had strong manufacturing operations in Virginia: Canon and Newport News Shipbuilding. Both needed better manufacturing systems and better coatings, especially the shipbuilders.

Canon and Newport News Shipbuilding ultimately agreed to each kick in $400,000 a year and a variety of other things. Once they were on board, the CCAM partnership had more leverage. For example, all three companies use product life-cycle management software from Siemens, so once the three companies had signed up for CCAM, Siemens more or less had to do the same. And because some of the research involves manufacturing systems that Siemens is working on, some of Siemens’ customers came along as well.

CCAM isn’t free of public subsidies. After all, the land originally came from Prince George County, which had acquired it long ago for an industrial park. The CCAM building was also funded partly by the U.S. Economic Development Administration and partly by state tobacco settlement money, which is used for economic revitalization in the Tobacco Road area. Plus, the universities are contributing their own money -- including state tax money -- to beef up faculty and research.

Nevertheless, the CCAM story is a great example of an economic development investment likely to generate a return. One of the best tests of whether an economic development strategy has long-lasting value is this: What does the state or region have left once the factories have closed? Although recruiting Rolls-Royce was the genesis of CCAM, the manufacturing breakthroughs that come out of the iconic building will most likely provide enduring benefit to Virginia long after Rolls-Royce has gone away.

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